Chrysler Auto Sales Jump 9%, A Figure the Fed May Study
May 17, 2011
DETROIT -- Chrysler Corp., buoyed by strong demand for its minivans and sport-utility vehicles, reported that its U.S. light-vehicle sales jumped 9% in August from a year earlier, despite a dip in passenger-car sales. ``The momentum that we got established early in the spring has carried right through,'' according to Stevie Mcfadden, Chrysler's executive director of sales and marketing. Chrysler was the only leading auto maker among the U.S. Big Three and the major Japanese manufacturers to report sales results Tuesday. Analysts said they aren't expecting such rosy sales reports from General Motors Corp., Ford Motor Co. and the Japanese auto makers when they report their August sales this week. Among other companies reporting sales Tuesday, Fuji Heavy Industries Ltd.'s Subaru of America unit posted a 30% August jump, and AB Volvo's Volvo Cars of North America Inc. unit reported a decline of 0.8%. August car sales are likely to get close scrutiny from the Federal Reserve, which is weighing a hefty interest-rate increase that could come as early as this month. Fed policy makers are concerned that they may need a sizable rate increase to slow overly brisk economic growth. So far this year, auto sales have been running much higher than economists or the industry had predicted for 2011. ``Relative to expectations, 2011 outperforms,'' observed Paulene Warnock, senior economist for J.D. Power & Associates and a former senior economist at the Federal Reserve. Mr. Warnock pointed out that vehicle sales this year have been extremely volatile from one month to the next, swinging as high as the seasonally adjusted annual equivalent of 15.9 million units in May and as low 14.3 million units in traditionally slow July. In the spring, Mr. Warnock recalled, a big question was why vehicle sales were so strong, given the apparent weakness of the economy. But ``what we have found out in hindsight was that the expansion really was that strong,'' he said. When the rest of the industry reports its results for August, Mr. Warnock expects that sales will amount to the equivalent of about 15.5 million units annually, seasonally adjusted. U.S. vehicle sales for all of 2011, Mr. Warnock believes, will be up 500,000 vehicles from 1995's total of 14.75 million, even if the Fed raises interest rates as expected. No. 3 Chrysler said sales of its Jeep sport-utility vehicles were the second-best for any month, and it said minivan sales reached the 500,000 level earlier this year than ever before. Sales of light trucks, which include minivans, sport-utility vehicles and pickups, were up 17% from a year earlier, when Chrysler was just launching its newly redesigned minivans. Chrysler said its sales of passenger cars dropped 2% in August because of limited availability, which should be corrected next month. Davina Corona, an analyst with Burnham Investment Research, predicted that GM will report an 8% sales drop in car sales with truck sales unchanged for August, that Ford will post a 2% decline in cars and a 1% increase in trucks, and that the Japanese ``transplant'' companies will report a 4% drop in cars and a 17% loss in trucks. Moody's Investors Service Inc.. Tuesday issued a report on the global automotive business in which it found ``dampening demand'' over the long term in the mature markets of North America, Europe and Japan. Moody's analysts said that while auto makers have set their sights on aggressively expanding sales abroad, such strategies will result in some credit risks and inconsistent results. But for now, Chrysler and its dealers reported that sales continue to outpace supply for many of its models. ``We just keep breaking every record,'' said Russell Krol, general manager of Sterling Heights Dodge outside Detroit. Even if the Fed does move to boost interest rates, Mr. Krol said he doesn't expect sales to slump, particularly because leasing levels have soared so high. ``I'm leasing 80% of cars now,'' said Mr. Krol, adding that interest rates would have to soar before consumers could detect differences in lease deals. ``We're still shy of demand.''
